In Determining the Effectiveness of an Entity's Policies and Procedures

question 42

Multiple Choice

In determining the effectiveness of an entity's policies and procedures relating to the existence or occurrence assertion for payroll transactions, an auditor most likely would inquire about and:

• A)observe the segregation of duties concerning human resource responsibilities and payroll disbursement.
• B)inspect evidence that all prenumbered payroll checks are accounted for.
• C)recompute the payroll deductions for employee fringe benefits.
• D)verify the preparation of the monthly payroll account bank reconciliation.

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Definitions:

Minimum Required

The least amount or level needed for a specific purpose, such as the minimum required investment or stock balance.

Net Present Value

The difference between the present value of an investment project’s cash inflows and the present value of its cash outflows.

Discount Rate

The interest rate used to discount future cash flows to present value, often reflecting the cost of capital or risk level.

Payback Method

A method of investment appraisal that calculates the time required for the cash inflows from a project to repay its initial investment.